European stocks rally on ECB stimulus comments

Europe's stock markets rallied Tuesday after ECB executive board member Benoit Coeure signalled that the central bank would temporarily ramp up its stimulus programme, dealers said.

In Paris afternoon trade, the benchmark CAC 40 index of top companies surged 1.80 percent to 5,102.60 points. Frankfurt's DAX 30 won 1.84 percent to 11,807 points compared with the close on Monday.

London's FTSE 100 added 0.35 percent to 6,992.90 points, with gains tempered by news that British inflation fell into negative territory for the first time since 1960.

In foreign exchange, the euro sank to $1.1188, down from $1.1315 late in New York on Monday.

"Equity markets are ecstatic over the news that the ECB will front-load its bond buying scheme, and the short-term boost to the QE scheme has driven stock markets around Europe higher," said analyst David Madden at trading firm IG.

Coeure, speaking at a conference in central London on Monday, declared that the ECB would  purchase more assets than previously planned in May and June under its multi-billion-euro quantitative easing (QE) stimulus programme, owing to an expected slowdown in the summer months.

"We are ... aware of seasonal patterns in fixed-income market activity with the traditional holiday period from mid-July to August characterised by notably lower market liquidity," he said.

He added that the ECB is "moderately frontloading its purchase activity in May and June, which will allow us to maintain our monthly average of 60 billion euros".

The ECB has stated that the QE stimulus, launched in March at a pace of 60 billion euros ($67 billion) a month, would last at least through September 2016.

ECB chief Mario Draghi last week declared that the bank's massive stimulus for the eurozone will remain in force "as long as needed" to stabilise prices.

With the economy and inflation recently picking up, there has been speculation that the ECB would wind up early its unprecedented 1.1 trillion euro asset-purchase programme.

- Greece talks -

Coeure's speech eclipsed ongoing market concerns over the plight of Greece, dealers said.

"Developments in Greece have taken somewhat of a backseat in Europe this morning with investors instead focused on comments from the ECB’s Benoit Coeure," noted Atif Latif, head of dealing at Guardian Stockbrokers in London.

"The comments have sent both European stocks and bonds sharply higher this morning while the euro has dived in currency space."

Greece on Monday entered the final stretch of tortuous talks with the European Union and International Monetary Fund, with Athens calling for a breakthrough by the end of the month.

The government and creditors have been stuck in a deadlock for four months over the reforms required to release a final 7.2 billion euros in bailout funds that are needed to service its debts.

There are fears that if it defaults on those loans Greece could tumble out of the eurozone.

Asian markets mostly rose Tuesday following a record close on Wall Street, but concerns about Greece's long-running debt-reform talks weighed on the euro.

Hong Kong gained 0.36 percent, Tokyo stocks climbed 0.68 percent, Seoul rose 0.34 percent and star performer Shanghai surged 3.13 percent. But Sydney finished 0.77 percent lower.

Wall Street investors pushed the Dow and S&P 500 to new records on Monday, thanks to a rally in Apple and multi-billion dollar acquisitions in the pharma and apparel sectors.

The Dow rose 0.14 percent and the S&P 500 added 0.30 percent, while the Nasdaq jumped 0.60 percent.

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